Reforma, Mexico City, December 21, 2022
By Azucena Vasquez
The Government of Andrés Manuel López Obrador promised to grow the economy at a rate of 4 percent per year and end with 6 percent. However, if the predictions of the Bank of Mexico (Banxico [the autonomous government bank, like the Federal Reserve in the U.S.]) are realized, the national economy will have an average annual growth of only 0.3 percent for this six-year administration, the lowest rate of the last six administrations.
Analysts point to the uncertainty generated by the governance of the López Obrador administration as one of the main causes of the country's economic stagnation. Thus, the result of the six-year term that ends in 2024 would only be higher than that registered in the government of PRI [Party of the Institutional Revolution] member Miguel de la Madrid from 1982 to 1988, when the average annual advance was 0.06 percent.
MV Note: De la Madrid inherited a severe economic and financial crisis from his predecessor José López Portillo as a result of the international drop in oil prices, the consequent recession and raising of interests rates on debt. This resulted in making Mexico's external debt crippling and it defaulted on payments of it months before De la Madrid took office.
The World Bank, the International Monetary Fund (IMF) and the U.S. government, together, bailed out Mexico from its debt. In exchange for their rescue, they required that de la Madrid introduce sweeping neoliberal policies to overcome the crisis [including selling off state-owned businesses such as the bank, railroads, the telephone company and mines]. This was the beginning an era of "neoliberal", market-oriented presidents in Mexico, along with austerity measures involving deep cuts in public spending.
In spite of these reforms, De la Madrid's administration continued to be plagued by negative economic growth and inflation for the rest of his term. The social effects of the austerity measures and inflation were particularly harsh on the lower and middle classes, with real wages falling to half of what they were in 1978 and with a sharp rise in unemployment and in the informal economy [those working day to day for cash] by the end of his term. Wikipedia
Although the Covid-19 pandemic affected the Mexican economy, beginning in 2019 it was already showing a decline, largely due to the uncertainty generated by the cancellation of the New Mexico International Airport (NAIM), said Gabriela Siller, director of Economic Analysis from Banco Base [a Mexican business and asset management bank].
In addition, during the pandemic in 2020, no fiscal support policy was implemented, such as a deferral of tax payments, so that companies could overcome the crisis generated by the pandemic. Although this enabled the Mexican government not to borrow more, it generated a drop in GDP, she added.
The specialist consulted regarding Banxico's predictions believes that the three main factors that are hindering economic growth are governance, inflation, and external conditions. At a specific level, the problems of public insecurity also stand out. Additionally, gross fixed investment has not grown to its full potential as a result of the uncertainty about governance, Siller added.
"[The government] has not been an internal engine of growth, rather it has slowed down the economy. The drivers of the Mexican economy have come from abroad: from exports, Foreign Direct Investment (FDI) and remittances [from Mexicans working in the U.S.]," she said.
Although Direct Foreign Investment could have been 50 billion dollars this year, it is estimated that it will reach only 37 billion dollars, due to capital outflows generated by uncertainty.
In addition, Ms. Siller of Banco Base points out that if the per capita economic growth of the country is analyzed based on the forecasts of the central bank, in the six-year term of López Obrador there will be a contraction of 4.2 percent, the second largest drop, behind that reported in the De la Madrid six-year term, when it was 7.9 percent. Spanish original